July 15, 2009

SA CTL Plant Spawns Big New Coal Mine

Shares in both Sasol and Exxaro Resources rose after Exxaro formed a joint venture with Sasol to build a new coal mine to supply Exxaro's proposed new 80,000-b/d CTL project. Sasol plans to build the new Mafutha project in South Africa's Limpopo province, which is known to have substantial coal reserves located in the Waterberg region.

Sasol has said sampling coal for the proposed project would start before year-end 2009. Exxaro, South Africa's biggest coal supplier to utility Eskom, said the new mine was in the pre-feasibility stage. Should the project proceed, it would require a new coal mine.

Exxaro said about 170,000 metric tons of coal will be mined for large-scale testing at Sasol's Secunda synthetic fuels facility.

"The market reacted quite favorably to the Exxaro announcement. I think it was positive news for both shares," Andrew Todd of BoE Private Clients said.

Wyoming Effort Could Help Fuel West

A public-private effort to research cleaner ways of using Wyoming coal could be a key in addressing the growing energy needs of the West. Wyoming is teaming up with GE to build a $100 million coal gasification research plant in Cheyenne to be operating in late 2012.

"What it means is it will open up a very large coal resource in a growing area of the country to gasify coal to produce not just electricity but motor fuels, fertilizer, substitute natural gas," said Jim Childress, executive director, Gasification Technologies Council.

"It's going to help us drive costs down, performance up, emissions in the direction that we need them to go," GE Energy General Manager Monte Atwell said. "So it's a big deal."

It's a big deal for Wyoming because coal is a key part of its economy. And it's a big deal for the West because of growing cities and the growing desire for electricity from cleaner fuel sources. "You got the growth in the West as far as population and economic activity, so
it's natural to want to be able to locate gasification plants by the resource," Childress said.

There are 19 other gasification plants around the country, but none use Wyoming coal on a commercial scale. Childress said Wyoming coal naturally contains more water than coals found elsewhere in the country and requires research into the best ways to gasify it efficiently.

"If I had to make a guess, GE sees this as an opportunity to get a leg up in a region which has a resource that's not optimally set up for gasifying because of moisture content," he said. Atwell said the facility will also test different technologies in capturing CO2.